Manufacturing output hits seven month high

Manufacturing output has risen to a seven month high driven by sharp increases in output and new orders.

The headline PMI in August was 57.5, from 56.3 in July. Any reading over 50 is deemed growth.

New order growth quickened to the fastest in the year so far, with strong demand reported from both domestic and export markets, according to the latest Manufacturing Purchasers Managers Index (PMI) from specialist bank Investec.

The rate of expansion in new export orders was marked and the highest in three months with panellists citing the UK, the Eurozone and the Middle East as sources of new work.

As a result of the strong order-book growth, there were further increases in the backlogs of work, quantity of purchases, and employment indices. The current sequence of job creation in the manufacturing sector has now extended to 23 months.

However the index found that margins remain under some pressure, with input costs showing another sharp increase in August, although the latest increase was the slowest in ten months.

Panellists reported higher costs for a range of raw materials including metals and timber.

Although firms were able to defray at least a portion of this cost inflation by raising output prices, a seventh successive decline in the profitability index was recorded.
Looking forward the forward-looking future output index remains “very elevated” and reached a three-month high in August. Over 50pc of respondents expect a rise in production over the coming 12 months, while just 4pc anticipate a decline.

“With a positive economic backdrop both in Ireland and abroad, we think this optimism is well-founded,” Philip O’Sullivan, economist with Investec, said.